There is one book that has really got me thinking, and I would strongly recommend each one of you to read it. It is the, 'Thinking, Fast and Slow' by Daniel Kahneman (an Israeli-American psychologist and Nobel laureate in Economic Sciences).

What the book essentially talks about is how the human brain works. There are two parts of the brain. There is the front or the sides, and then there is the brain which is behind. Generally, when there are intuitive, fast decisions to be made, we tend to do them from the front part of the brain. Things which require us to deliberate are dealt with by the rear side of the brain. The general tendency of human beings is not to remain in a state of flux for long. We tend to make decisions based on intuition rather than deliberation.

That is essentially what is meant by thinking fast and thinking slow.

Thinking fast, as I said, is where you start thinking quickly and intuitively. What makes sense to you, you try to make a call without necessarily waiting for it to be validated by data or further thought.Thinking slow, on the other hand, is where you take the time to think.

So, can we contextualise the same thing for boards?

If we draw an analogy where the board of a company is like a brain, then it too has the same tendency to think fast and think slow.

Take the case of thinking fast. You have a cyber or market integrity incident and you need to take decisions quickly. You need to take certain intuitive calls and not wait for every validation to take place, but ensure that timely decisions are taken and when you think about things slowly, it could be a large acquisition, a fundamental strategy shift, a new product or a new policy. These require a great deal of deliberation.

And that is the point, ladies and gentlemen, I am trying to make that there is no one-size-fits-all. It depends on the circumstance; it depends on the incident but the board has to apply itself and determine whether it needs to think fast or whether it needs to think slow.

A very important policy deliberation recently spoken about was that there is a paradigm shift in the way we look at cyber defence; it must move from being an IT issue to becoming a boardroom priority. There has to be technical expertise at the board level to understand and appreciate what is truly an issue and what is not.

So, board effectiveness begins with recognising which decisions require speed and which require deliberation; which decisions you need to think fast about and which decisions you need to think slow about.

So, if I were to put this into a simple structure, what is FAST?

FAST is Creating Foresight, Accountability, Speed with Discipline and Transparency.

Now, why is foresight FAST?

When an incident or an occurrence happens, the management is going to have a view. The board should have the foresight to quickly understand whether this needs to be acted upon immediately or whether it does not. There is a certain foresight required, almost as an intuition at the board level, to understand whether something needs to be done quickly or not. Obviously, there has to be accountability and this is important because the board needs to decide whether a particular decision needs to be taken at the board level, at the management level, at the CXO level or at the local level. It then needs to fix accountability commensurate with the authority it has given.

There are complex scenarios in real life where it is not a one-size-fits-all. It is not something which can always be easily determined. So, it is about making that judgement on your feet. The board will have to decide where the accountability lies.

Speed with Discipline.

While speed is important, consistency of that speed is also important. The consistency of the decisions made is also important. There has to be a certain rigour. So, while there may be an event which has happened and which requires immediate action, that action still needs to follow the rigour of discipline so that the consistency and credibility of the organisation are not compromised.

Real Value is the visibility of the company, its identity and its brand. It is the assurance and trust that are built around the belief that this company can be depended upon to be long-term sustainable, long-term transparent, honest and truthful.

And last but not least-and most importantly: Trust.

Transparency is the foundation on which trust is going to be built. Transparency, I believe, is governance, and not compliance. Governance at the board level, or transparency at the board level, is about doing what is right even when nobody is looking at you. It is your own conscience which tells you that this is the truth and this is what I need to do from a sustainable standpoint.

On the slow side, there is Stewardship. That is, how do you ensure shareholder activism happens?

You encourage diverse views to come in because that is the way you will either get validation or get improvement on what you have thought as a board. Long-term value creation requires a lot of deliberation and a lot of important thinking about how value creation can be achieved much faster and there has to be oversight over the board, as well as the wisdom of the leadership.

Wherever there is lower consequence and low immediate urgency, the board should delegate that to management and not try to micromanage.

Where there is high consequence but low immediate urgency, such as a takeover, the decision-making needs to be slow and considered.

Where there is lower consequence and high immediate urgency, it could be a media report which is fictitious or a rumour which is circulating. That needs to be acted upon and commented on, stating that it is false. That is why it needs to be passed. But a high-consequence and high-immediate-urgency situation, such as a cyber incident, requires both fast and slow thinking. You need to act immediately, but you also need to think about long-term sustainability and how the policy needs to evolve and how the teams need to deal with it. So, when the board has assessed what is slow and what is fast, that is what creates value.

And what is real value?

Real Value is the visibility of the company, its identity and its brand. It is the assurance and trust that are built around the belief that this company can be depended upon to be long-term sustainable, long-term transparent, honest and truthful.

Board effectiveness begins with recognising which decisions require speed and which require deliberation; which decisions you need to think fast about and which decisions you need to think slow about.

And, as I said, a long-term orientation means that the company is not only contributing to itself; it is contributing to society at large and to the country.

Uncertainty readiness is also important. If you have created a toolkit around what needs to be slow, what needs to be fast, and what needs to be both slow and fast, you are ready for certain unprecedented circumstances which may not have been thought through and last but not least is Execution Accountability to ensure that everybody is accountable and that it is based on action, and therefore not merely on words.

There is an interesting McKinsey study, the key themes are that everything from AI adoption to operational resilience to strong cash flows are important parameters for value creation in a company. If you see the chart, one of the strong financial parameters comes pretty low down.

That shows that the stakeholders want long-term sustainability to happen, and long-term value creation, rather than just immediate financial returns.

And all these are the results of an effective board. A well-governed company enjoys a higher price-to-earnings ratio. Two companies earning the same amount of money and one which is better governed than the other will have a higher price-to-earnings ratio.

And I would like to end with that famous song, 'Yeh Dosti Hum Nahi Todenge,' from the movie 'Sholey.' If you contextualise the picture from the song, it is the company board and management which are driving the bike, while the shareholders are the ones sitting on the shoulder. And ultimately, it really leads to, and remains, a long-term, sustainable relationship between the shareholders.

Jai Hind.